European Commission report: Implications for third country issuers

European Commission report: Implications for third country issuers

European Commission report: Implications for third country issuers

Oct 25 2022

On 10 October, the European Commission released its report to the European Parliament and Council on the functioning of the EU Securitisation Regulation.

This was mandated by the Securitisation Regulation itself as part of a normal review process often found in European legislation.  As part of the review process, the European Commission released a targeted public consultation on the EU securitisation framework in mid-2021. 

There were many submissions made by industry in Europe, US, and Australia. In fact, the ASF, Association for Financial Markets in Europe (AFME) and the US Structured Finance Association (SFA)  each made separate submissions on the negative aspects of the Regulation for third country issuers including inappropriate templated data requirements.  View ASF submission

The submissions provided a fair amount of emphasis on how non-EU issuers ought to be distinguished from EU issuers and that the nature of non-EU exposures and products make strict compliance with the European asset level data templates practically challenging and often impossible. There was some hope that the European Commission would recommend concessions or simplification of both Article 5 and Article 7 obligations for non-EU issuers selling into Europe on the basis that securitisations in advanced third country jurisdictions such as Australia have well established and detailed reporting regimes. 

The Commission in its report did not recommend any legislative changes to the EU Securitisation framework and emphasised the requirement for there to be strict compliance with obligations under the Regulation by EU and non-EU issuers alike selling to EU investors.  However, the Commission has invited the European Securities and Markets Authority (ESMA) to review the disclosure templates for underlying exposures in securitisation to address possible technical difficulties in completing the information required in certain fields, remove possibly unnecessary fields and align them more closely with investors’ needs. The Commission noted that ESMA should consider whether information on a loan-by-loan basis is useful and proportionate to investors’ needs for all types of securitisations.
The ASF, AFME and the US SFA are investigating the impact of the Commission’s report for third country (non-EU) issuers and what steps are available to at least make the current reporting requirements under the ESMA asset level data templates more suitable to Australian products and exposures.  The ASF is also considering holding a webinar with a European based law firm to discuss the implications of the report and the next steps for Australian issuers wishing to sell to EU investors.  In the meantime, please feel free to reach out to Chris Dalton or Robert Gallimore at the ASF if you wish to discuss.